Red Flag Bulletin – August 2017


The latest news from our regional teams about financial crime, corruption, sanctions and other integrity issues. This bulletin covers recent enforcements and investigations in South Korea, Nigeria, Venezuela, Russia, Moldova and Israel.
For more information, please do not hesitate to get in touch with the team.

Asia Pacific

South Korea: Bribery charges for Samsung head

On 25 August, Jay Y Lee, the acting head of Samsung, received a five-year prison sentence for bribery. Charges against Lee included embezzlement, perjury and the bribery of former president Park Geun-hye (2013-2017) to help shore up his control of the conglomerate. The sentence is one of the longest ever to be handed to a South Korean executive, and is perceived to be a watershed moment in the enforcement of laws against leaders of South Korea’s family-owned conglomerates, known as chaebols.The trial of former president Park is ongoing.

Sub-Saharan Africa

Nigeria: The net closes in for Alison-Madueke

Diezani Alison-Madueke, Nigeria’s former Minister of Petroleum Resources, is facing a new round of corruption cases, despite still being on bail in the UK after her 2015 arrest on money laundering charges. In July this year, the US Department of Justice filed a civil lawsuit, alleging that, between 2011and 2015, two Nigerian businessmen had conspired to bribe Madueke, who had inturn directed lucrative contracts towards companies the businessmen owned. It is alleged that the revenues were then laundered through the US, and used to purchase $144m in assets, which the Department of Justice is seeking torecover. Also in July, a Lagos federal court ordered the temporary for feiture of Madueke’s $37.5m apartment complex on the city’s exclusive Banana Island, alleging that it was obtained with illegally-acquired funds. In August, the for feiture was made permanentand, following an application by the Nigerian Economic and Financial Crimes Commission, the court ordered that 56 more houses be seized. A successful prosecution of Madueke would be President Buhari’s government’s first notable conviction of acorrupt official.

Latin America

Venezuela: New financial sanctions against Maduro government

On 25 July, US President Donald Trump issued an executive order imposing a new series of sanctions against Venezuela, which aim primarily to cripple the Maduro government’s ability to finance its activities. This is the fourth round ofsanctions on Venezuela announced by Trump´s government and the harshest todate. The order prohibits the US financial sector from conducting any transactioninvolving new debt or equity issued by the Venezuelan government or PDVSA, thenational oil company. Further, it also forbids Citgo, PDVSA’s US-based refinerand retailer, from remitting dividends to Venezuela, removing a vital lifelinefor the Maduro regime. While the executive order did not include an oilembargo, administration officials confirmed that the US government wouldcontinue to increase the pressure on Caracas through escalatory measures,hinting that the option remains on the table if the political situationcontinues to deteriorate.

Russia CIS

Russia: Theatre director arrest sparks fears of government clampdown

On 23 August, Russian investigators placed Kirill Serebrennikov, one of the country’s most prominent theatre directors, under house arrest pending further investigation and trial into fraud charges. Serebrennikov, who has been accused of embezzling RUB 68 million roubles (GBP 900,000) of government fundsallocated for one of his projects, has dismissed the charges as “incredibly absurd and schizophrenic”. The case has generated wide spread condemnation, both in Russia and abroad, with many opposition figures and other prominent individuals in the art world viewing themove as part of a clampdown on dissent ahead of the March 2018 presidential election.

Moldova: Political party launches treason lawsuit against president

On 29 August, the Party of Action and Solidarity (PAS), a liberal Moldovan political party, announced on its website that it had filed a criminal complaint against President Igor Dodon accusing himof treason and of “fomenting divisions in the interest of Russia”. The PAS statement contended that Dodon, who has repeatedly expressed his supportfor Moscow, had acted “contrary to the interests of the Republic of Moldova,openly promoting the interests of another state – the Russian Federation”. The move came shortly after Moldova’s Independence Day on 27 August, with the country deeply divided between pro-Russia and pro-EU sentiments amongst the population and government.

Middle East & North Africa

Israel: Corruption probes into Netanyahu

Israeli politics has been dominated in recent months by reports off our separate corruption investigations into Benjamin Netanyahu, the country’s Prime Minister. One ofthese probes is particularly representative of the culture of corruption inIsraeli politics. The investigation centres on allegations that Netanyahu concealed his friendship with Shaul Elovitch, the owner of Israel’s largest telecommunications company, at a time when Netanyahu was involved in key decisions that benefitted Elovitch’s media interests. This is not the only example of the problematic association in Israel between political and mediaelites. Another probe into Netanyahu concerns claims that the he sought to secure more favourable coverage from one newspaper by agreeing to restrict the distribution of a rival tabloid. While an indictment is expected, Netanyahu’s political standing does not seem to have suffered with an electorate that has become inured to allegations of corruption in politics.